The cryptocurrency market’s October collapse — wiping out more than $370 billion in value within hours — has been described by traders as the worst liquidation event in digital asset history.
Bitcoin plunged from record highs near $126,000 to about $104,000 in a single day, while Ethereum fell below $4,000 and many altcoins lost up to 90 per cent of their value. For a market that had looked invincible just weeks earlier, the sudden crash exposed how fragile crypto’s new institutional era still is.
Analysts say the trigger was a perfect storm of macro and structural pressures — leveraged liquidations, exchange-traded fund (ETF) outflows, rising US real yields, a stronger dollar, and a few headline shocks that tipped sentiment. “It was a textbook cascade,” said Matt Hougan, chief investment officer at Bitwise Asset Management. “A minor drop in price triggered margin calls, which triggered forced liquidations, which pulled prices down further. When leverage builds up this high, even small tremors become earthquakes.”
By mid-October, the total value of digital assets had plunged to $3.3 trillion from over $4.1 trillion just weeks earlier. According to data from CoinGlass, more than $19 billion in leveraged positions were wiped out in a 24-hour window — nine times higher than the February 2025 correction. Analysts say it was a “necessary purge” after months of speculative excess in meme tokens, leveraged derivatives, and thinly traded DeFi assets.
The correction began after Bitcoin hit new highs above $126,000 in early October. Investors who had piled into long positions using borrowed funds were caught off guard when prices began slipping. As Bitcoin dipped below $115,000, exchanges started liquidating positions automatically. Within minutes, billions of dollars in margin trades were closed out, flooding the market with forced sales. The shock spread to altcoins like Solana, Avalanche, and Cardano, many of which fell 50–70 per cent overnight.
Adding fuel to the fire were outflows from U.S.-listed Bitcoin and Ether ETFs, which had been the backbone of institutional demand through 2025. According to Bloomberg Intelligence, these funds saw over $755 million in withdrawals during the worst sessions. What had once been a source of structural buying pressure turned into a sudden source of selling. “ETF flows, which used to stabilise markets, have now become a volatility amplifier,” said James Butterfill, head of Research at CoinShares. “When sentiment turns, institutions redeem, and those redemptions become self-reinforcing.”
Macro forces made matters worse. Real yields on US10-year Treasuries climbed to 2.3 per cent — their highest since 2024 — while the dollar index (DXY) surged near 108, raising the opportunity cost of holding non-yielding assets like Bitcoin. “Crypto trades like an ultra-high-beta version of gold,” explained Mike McGlone, senior macro strategist at Bloomberg Intelligence. “When real yields and the dollar rise, speculative assets feel the pain first.”
Geopolitical tensions also contributed to the selloff, with renewed tariff threats between major economies and energy market volatility triggering risk aversion across global markets. The combination of thin liquidity and fast-moving algorithms turned a normal correction into a flash crash. “Today’s crypto market is more interconnected with global macro than ever,” said Kaiko’s Director of Research, Clara Medalie. “That means macro shocks travel through it faster — and hit harder — than in past cycles.”
The question now is whether this is a short-term correction or the start of another prolonged bear market. Most analysts see it as the former — a painful but healthy reset. “This is not 2022 or 2018,” said Antoni Trenchev, co-founder of Nexo. “Back then, crashes came from fraud or systemic failure. This time, it’s leverage and liquidity — classic market mechanics. The fundamentals of adoption, institutionalisation, and regulation are far stronger.”
Bitcoin has since stabilised around $110,000, up modestly from its lows. Ethereum trades near $4,000, while most major altcoins have recovered 10–15 per cent from their bottoms. Experts caution that volatility will persist in the near term, as derivative open interest and funding rates continue to normalise. “We’re in a deleveraging phase,” said Coinbase strategist David Duong. “Once forced sellers are flushed out, liquidity returns and prices can stabilise.”
Historically, such deleveraging periods last six to ten weeks. Markets then rebuild gradually as funding conditions reset and new buyers emerge. Analysts at Bloomberg and Reuters expect crypto to recover through early 2026 as inflation pressures ease and the U.S. Federal Reserve begins cutting rates. Their median forecast puts Bitcoin at $125,000 by the first quarter of next year, with a potential rebound to $150,000 if ETF inflows resume.
Analysts believe that the underlying blockchain economy remains resilient. Bitcoin’s daily transaction volumes continue to exceed $28 billion — 40 per cent higher than a year ago — and Ethereum’s network utilisation remains above 80 per cent, driven by robust activity in Layer-2 protocols. Institutional interest has not disappeared; it has simply paused. BlackRock’s iShares Bitcoin ETF and Fidelity’s Wise Origin Bitcoin Trust still report net inflows on a monthly basis despite the week’s turbulence.
In the longer term, crypto’s fate will hinge on three variables: ETF flows, real yields, and regulatory clarity. If monetary policy eases, the dollar softens, and investor appetite returns, Bitcoin could reclaim its previous highs. Conversely, if real yields rise further or regulators tighten enforcement, the asset class could remain range-bound or slide deeper.
As for whether the worst is over, opinions differ. “Volatility is the price you pay for innovation,” said Galaxy Digital CEO Mike Novogratz. “Crypto isn’t dead — it’s just maturing. Every bull run ends with a cleansing, and that’s what we’re seeing now.” For long-term believers, the fundamentals remain intact; for speculators, the lesson is clear — gravity still applies, even in the metaverse.
